Saving for retirement should be a lifelong pursuit, but life happens and recessions, inflation, health issues and salary constraints can hamper the ability to save early and consistently. A recent AARP study found 18% of respondents ages 50 and over had no retirement savings. Over 50% of current retirees without savings cited everyday expenses as the financial obstacle that prevented them from saving adequately followed by housing costs (40%), debt payments (37%) and healthcare expenses (19%).
If you are wondering if you have enough saved or are close to the minimum needed to retire in your state, a recent study from GOBankingRates looks at the annual cost of living, your annual expenditures after Social Security, and most importantly, how much savings you need to retire in all 50 states.
The 30 states where you need the least savings to retire
If you are low on savings or simply want a lower cost of living in retirement, West Virginia could be the state for you. It's state capital of Charleston is number 10 on the Kiplinger list of The 25 Cheapest Places to Live: U.S. Cities Edition. It has among the lowest property taxes in the country and there are no death taxes.
In fact, the 10 states with the lowest savings needs are prominently featured on our list of cheapest places to live. Cities such as Knoxville, TN and Birmingham, AL are two of the best cities for retirees to rent. They have quality hospitals and doctors, plenty of green space and retiree-friendly amenities.
You might notice that Nebraska and South Dakota as well as Tennessee and Indiana share the same numbers for expenses and savings needs. That doesn’t mean underlying costs are comparable. For example, Nebraska's annual cost of housing is $9,435, which is $865 less than South Dakota, where the annual cost averages $10,300. However, utilities are $207 cheaper in South Dakota for an annual cost of $3,626, while folks in Nebraska pay $3,833. Whereas South Dakota is one of the top 10 tax-friendly states for retirees, Nebraska is one of the most expensive states to die In.
The 20 states where you need the highest minimum savings to retire
The states with the highest minimum savings to retire are well known for their extraordinary cost of living. These states fill out our rankings and harbor the 10 most expensive cities to live in and the 15 most expensive housing markets in the country.
While it's no surprise that the Polynesian paradise of Hawaii has the highest annual cost of living as a retiree, it also has lowest property tax in the country with an effective property tax rate of 0.31%.
California (2), Connecticut (13), Massachusetts (3), New Jersey (10), New York (5), Rhode Island (12), Utah (17), and Vermont (8) are the worst states to retire in for taxes when you consider at tax rates on retirement income and property tax bills. For instance, California is the only state that fully taxes military retirement pay.
The contrast between the places with the lowest minimum savings needs, West Virginia, and the greatest minimum savings, Hawaii, is stark. Retirees in Hawaii need almost $1.5 million more than in West Virginia. Housing costs in coal country are 42.6% below average, while costs in the Aloha state are 213.2% above average. Healthcare is one place where both states are paying more than the norm. But the difference is where the contrast stands out: West Virginians pay 1.3% and Hawaiians pay 22% above the norm respectively.
Americans are not saving enough
Saving enough can be a challenge and there are many people lagging behind. The median retirement savings for those ages 54-64 is $185,000 and the average balance is $538,00) and for those aged 65-74 the median retirement savings is $200,000 and average is $609,000 according to The Federal Reserve Survey of Consumer Finances 2022.
Among the most common retirement planning mistakes are underestimating the impact of inflation (49%), life expectancy (47%) and overestimating investment income (42%), says the Natixis 2022 Financial Professionals Report.
When you look at all of the numbers, the average retiree will be dependent on Social Security to makes ends meet. This is a dicey strategy as the Social Security trust fund will become insolvent in 2033. At that point, the fund's continuing income is expected to fund just 79% of scheduled benefits resulting in your benefits being reduced by 21%.
Methodology: To find out exactly how much you need to retire in your state, GOBankingRates found the annual cost of expenditures for a retired person in each state by multiplying the 65-year and older expenditures from the U.S. Bureau of Labor Statistics 2022 Consumer Expenditure Survey by the cost-of-living index for each state from the Missouri Economic Research and Information Center’s 2024 Q1 cost of living series. To find how much money a retired person would need to save, GOBankingRates divided each state’s annual expenditures, minus the annual Social Security income as sourced from the June 2024 Social Security Administration’s Monthly Statistical Snapshot, by .04, assuming drawing down savings by four percent each year to pay for living expenses. All data was collected and is up to date as of July 17, 2024.
